Gore v Australian Securities and Investments Commission
[2017] FCAFC 13
•13 February 2017
FEDERAL COURT OF AUSTRALIA
Gore v Australian Securities and Investments Commission [2017] FCAFC 13
Appeal from: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342
Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (No 2) (2015) 106 ACSR 302; [2015] FCA 527
File number: QUD 488 of 2015 Judges: DOWSETT, RARES, GLEESON JJ Date of judgment: 13 February 2017 Catchwords: CORPORATIONS – Corporations Act 2001 (Cth) – accessorial liability – prohibition on offering securities under s 727(1) and (2) without disclosure document being lodged if disclosure required under Pt 6D.2 – whether alleged accessory without actual knowledge that offer required disclosure capable of being found to be knowingly concerned in principal’s contraventions of s 727(1) and (2) – elements of accessory’s contravention of s 727(1) and (2) – whether necessary for party alleging contravention to prove that no exemption from requirement of disclosure applies to the offer of securities
CORPORATIONS – Corporations Act 2001 (Cth) – accessorial liability – where civil and criminal penalties apply to offences under s 727 – where offence of contravening s 727(1) and (2) created by s 1311(1) – where s 1308A of Corporations Act 2001 (Cth) applied provisions of Criminal Code (Cth) to offences under Act – whether Pt 2.4 of Criminal Code (Cth) required proof of physical and fault elements in respect of contravention of s 727(1) and (2) – proof of physical and fault elements under the Criminal Code (Cth) necessary to establish accessory’s contravention of s 727(1) and (2)
CORPORATIONS – accessorial liability for misleading or deceptive conduct under s 1041H of the Corporations Act 2001 (Cth) and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) – elements of an accessory’s contravention of s 1041H and s 12DA – whether accessory had actual knowledge that disclosure document made representation that was misleading or deceptive or likely to mislead or deceive
EVIDENCE – Australian Securities and Investments Commission Act 2001 (Cth) – admissibility of transcript of examination under s 19 – where transcript not admissible in criminal proceeding or proceeding for imposition of a penalty – where examinee claimed privilege against self‑incrimination or exposure to a penalty in examination – whether application for injunctions pursuant to s 1324(1) of Corporations Act 2001 (Cth) to prevent examinee from engaging in lawful conduct by which she previously had earned livelihood was proceeding for the imposition of a penalty for the purposes of s 68(3)(b) of Australian Securities and Investments Commission Act 2001 (Cth)
CORPORATIONS – injunction ordered under s 1324(1) of Corporations Act 2001 (Cth) after finding that accessory knowingly concerned in principal’s contravention of s 727(1) and (2) – whether purpose of injunction under s 1324(1) protective or punitive – where principal contraveners received lesser penalties than accessory – whether principle of parity in sentencing or imposing penalty correctly applied – whether primary Judge erred in exercise of discretion in setting length of injunction restraining accessory from engaging in lawful conduct
Legislation: Australian Securities and Investments Commission Act 2001 (Cth) ss 12BB, 12DA, 12GD, 19, 68
Bankruptcy Act 1966 (Cth) Pt X
Corporations Act 2001 (Cth) ss 79, 206C, 260A, 260D, 417B, 700, 703, 704, 705, 706, 707, 708, 708AA, 708A, 709, 710, 711, 712, 713, 714, 715, 716, 718, 727, 769C, 911A, 1041H, 1101B, 1308A, 1311, 1324, 1332, 1349, items 236, 237 and 239 of Sch 3
Crimes Act 1914 (Cth) ss 31, 39
Criminal Code Act 1995 (Cth)
Criminal Code (Cth) ss 3.1, 3.2, 4.1, 4.2, 4.3, 5.1, 5.4, 5.6, 9.1, 11.6, 16.4
Federal Court of Australia Act 1976 (Cth) s 21
Franchising Code of Conduct (Cth)
Trade Practices Act 1974 (Cth) s 51AD
Cases cited: Adler v Australian Securities and Investments Commission (2003) 46 ACSR 504
Australian Gas Light Company v Australian Competition and Consumer Commission (2003) 137 FCR 317
Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80
Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1; (2009) 224 FLR 50
Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345
Australian Securities and Investments Commission v Karl Suleman Enterprizes (2003) 177 FLR 147
Australian Securities and Investments Commission v Monarch FX Group Pty Ltd (2014) 103 ACSR 453
Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88
Blanch v British American Tobacco Australia Services Ltd (2005) 62 NSWLR 653
Buckley v Tutty (1971) 125 CLR 353
Carter v Mace [1949] 2 All ER 714
Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 326 ALR 476
Commonwealth v Progress Advertising and Press Agency Co Pty Ltd (1910) 10 CLR 457
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503
Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192
Fox v Percy (2003) 214 CLR 118
Giorgianni v The Queen (1985) 156 CLR 473
Gray v Richards (No 2) (2014) 315 ALR 1
Green v The Queen (2011) 244 CLR 462
House v The King (1936) 55 CLR 499
Hume v Monro (No 2) (1943) 67 CLR 461
Johnson v Youden [1950] 1 KB 544
Jones v Dunkel (1959) 101 CLR 298
Lamb v Cotogno (1987) 164 CLR 1
Melbourne Steamship Co Ltd v Moorehead (1912) 15 CLR 333
Momcilovic v The Queen (2011) 245 CLR 1
Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404
Pereira v Director of Public Prosecutions (1988) 82 ALR 217
Peters v The Queen (1998) 192 CLR 493
R v Donaldson (2009) 103 SASR 309
R v Hillier (2007) 228 CLR 618
R v Hunt [1987] 1 AC 352
R v JS (2007) 230 FLR 276
Rafferty v Madgwicks (2012) 203 FCR 1
Rich v Australian Securities and Investments Commission (2004) 220 CLR 129
Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53
Smith v Jenner [1968] Crim LR 99
Sullivan v Moody (2001) 207 CLR 562
United States v Peoni 100 F 2d 401 (1938)
Vines v Djordjevitch (1955) 91 CLR 512
Warner v Hung (No 2) (2011) 297 ALR 56
Wentworth v New South Wales Bar Association (1992) 176 CLR 239
Yorke v Lucas (1985) 158 CLR 661
Date of hearing: 22 and 23 February 2016 Date of last submissions: 1 August 2016 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 313 Counsel for the Appellant and the Cross‑Respondent: Ms K Morgan and Ms S Tame Solicitor for the Appellant and the Cross‑Respondent: Clamenz Lawyers Counsel for the Respondent and the Cross‑Appellant: Mr N O’Bryan SC with Ms C van Proctor Solicitor for the Respondent and Cross‑Appellant: Australian Securities and Investments Commission
Table of Corrections 14 February 2017 Paragraph 1 has been replaced with the following:
We have read the reasons prepared by Rares J. We wish only to address the appellant’s alleged accessorial liability in connection with s 727 of the Corporations Act 2001 (Cth) (the “Corporations Act”). We otherwise agree with his Honour’s reasons and proposed orders.27 October 2017 In paragraph 234 in the first sentence, a double quotation mark has been inserted before the words a principal purpose. ORDERS
QUD 488 of 2015 BETWEEN: MARINA GORE
Appellant
AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Respondent
AND BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Cross-Appellant
AND: MARINA GORE
Cross-Respondent
JUDGES:
DOWSETT, RARES, GLEESON JJ
DATE OF ORDER:
13 FEBRUARY 2017
THE COURT ORDERS THAT:
1.The appeal be dismissed with costs.
2.The cross appeal be dismissed with costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DOWSETT AND GLEESON JJ:
We have read the reasons prepared by Rares J. We wish only to address the appellant’s alleged accessorial liability in connection with s 727 of the Corporations Act 2001 (Cth) (the “Corporations Act”). We otherwise agree with his Honour’s reasons and proposed orders.
The primary allegation against the appellant (“Ms Gore”) concerning s 727 was that she was, directly or indirectly, knowingly concerned in the contravention of that section by other defendants. As against her, the respondent (“ASIC”) sought declaratory and injunctive relief. At some stage, ASIC identified a possible difficulty in obtaining declaratory relief as to accessorial liability for a breach of s 727. As a result, it sought, and obtained leave to amend the originating process so that declaratory relief was sought pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth), (the “Federal Court Act”). As to the availability of injunctive relief, ASIC relied upon s 1324(1) of the Corporations Act which provides:
(1)Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:
(a)a contravention of this Act; or
(b)attempting to contravene this Act; or
(c)aiding, abetting, counselling or procuring a person to contravene this Act; or
(d)inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f)conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.
In the course of our consideration of the matter, it became apparent that Ch 2 of the Criminal Code (Cth) (enacted as part of the Criminal Code Act 1995 (Cth)) (the “Criminal Code”) applies to offences under the Corporations Act. The contravention of s 727 is a criminal offence. Chapter 2 of the Criminal Code deals with, amongst other things, the so‑called physical and fault elements of offences created under Commonwealth legislation. It also deals with accessorial liability. In general, accessorial liability under the Corporations Act is regulated by s 79 which provides:
A person is involved in a contravention if, and only if, the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced, whether by threats or promises or otherwise, the contravention; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d)has conspired with others to effect the contravention.
However s 1324(1) does not use the words “involved in a contravention”. It rather contains its own accessorial provisions in subparas 1324(1), (c), (d), (e), and (f). These paragraphs are similar to paras (a), (b), (c) and (d) of s 79.
We sought and obtained further submissions from the parties concerning these matters. We have taken those submissions into account.
ACCESSORIAL LIABILITY, APART FROM THE CRIMINAL CODE
There is, in our view, a distinction between being concerned in, or party to a contravention and being knowingly concerned in, or party to that contravention. Neither participation in the alleged contravention, nor knowledge of the elements of the contravention is sufficient in itself to attract accessorial liability under s 1324(1)(e). Rares J has demonstrated that Ms Gore so participated. We need say nothing further about that aspect. The remaining question concerns the state of Ms Gore’s knowledge at the times at which she participated.
In Yorke v Lucas (1985) 158 CLR 661 Mason ACJ and Wilson, Deane and Dawson JJ held that in order to establish, in civil proceedings, that a person is liable as an accessory to a statutory contravention, all of the elements of that contravention must be proven, as must be the alleged accessory’s knowledge of the essential facts constituting the contravention. At 661, their Honours said, concerning a legislative provision similar to s 79 and paras (c) to (f) of s 1324(1):
In our view, the proper construction of par. (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.
Brennan J (as his Honour then was) published separate reasons to the same effect. At 676, his Honour adopted a passage from the joint reasons of Wilson, Deane and Dawson JJ in Giorgianni v The Queen (1985) 156 CLR 473 in which their Honours held that for the purposes of the criminal law, an accessory’s participation, “must be intentionally aimed at the commission of the acts which constitute it”.
In Giorgianni, the Court was comprised of Gibbs CJ and Mason, Wilson, Deane and Dawson JJ. The case concerned an offence of culpable driving, an offence of strict liability. The conduct in question was the driving of a motor vehicle with defective brakes. The relevant legislation provided that where a person aided, abetted, counselled or procured another person to drive dangerously, resulting in death or grievous bodily harm, the first person might be convicted of the offence of culpable driving. The appellant was so convicted, although it had not been proven that he knew of the defective brakes. At 481 Gibbs CJ endorsed the following passage from the reasons of Lord Goddard CJ in Johnson v Youden [1950] 1 KB 544 at 546:
Before a person can be convicted of aiding and abetting the commission of an offence he must at least know the essential matters which constitute that offence. He need not actually know that an offence has been committed, because he may not know that the facts constitute an offence and ignorance of the law is not a defence.
At 482 Gibbs CJ said:
Numerous other cases, including, in Australia, Blackmore v. Linton ... and Wilson v. Dobra ... (a case under the Criminal Code (W.A.)), accept that the general principle is that a person can be convicted as a secondary party only if he had knowledge of the essential circumstances. Further, as has already been indicated, the person charged must have intended to help, encourage or induce the principal offender to bring about the forbidden result. In other words, both knowledge of the circumstances and intention to aid, abet, counsel or procure are necessary to render a person liable as a secondary party ... .
At 484, Gibbs CJ considered two “licence” cases. In Carter v Mace [1949] 2 All ER 714 a person who conducted a transport clearing house was convicted as an accessory to the offence of carrying cargo without an appropriate licence. The decision appears to support the proposition that for the purpose of deciding whether there is accessorial liability, failure to make reasonable enquiries may be equated to knowledge. Gibbs CJ rejected that proposition. In Smith v Jenner [1968] Crim LR 99, a divisional court also rejected it. As far as the reports go, in neither case was it suggested that the prosecution had to show that the alleged accessory knew of the need for a relevant licence, as opposed to the facts creating such need. However it seems unlikely that in either case, the alleged accessory could have denied knowledge of the need for the relevant licence. A person conducting a transport clearing house would probably be aware of transport licensing matters. The driving instructor in Smith v Jenner would surely have known that a learner‑driver needed a licence or permit. If these assumptions are correct, there would have been little point in the defendant in either case raising such matters. We make these observations only as a possible explanation of the fact that the point was apparently not raised. Another explanation might be that each defendant accepted that the prosecution did not have to prove knowledge of the law.
In Giorgianni, Mason J (as his Honour then was) also approved Lord Goddard’s view in Johnson v Youden. His Honour said:
(T)he “link in purpose” between the secondary party and the principal offender is not established where a person does something to bring about, or render more likely, the commission of an offence by another in circumstances in which, through ignorance of the facts, it appears to him to be an innocent act.
At 500, Wilson, Deane and Dawson JJ said:
It is necessary, therefore, to proceed upon the basis that the offences of culpable driving were committed by Renshaw. It is those offences which the appellant was alleged to have aided, abetted, counselled or procured. To have done so he must have intentionally participated in the principal offences and so must have had knowledge of the essential matters which went to make up the offences of culpable driving on the occasion in question, whether or not he knew that those matters amounted to a crime ... .
In considering whether an alleged accessory’s recklessness is sufficient to constitute knowledge, their Honours said at 505:
The third question raised by the passage which we have cited from Reg. v. Glennan is whether it is possible to aid, abet, counsel or procure the commission of an offence by acting recklessly. Aiding, abetting, counselling or procuring the commission of an offence requires the intentional assistance or encouragement of the doing of those things which go to make up the offence. The necessary intent is absent if the person alleged to be a secondary participant lacks knowledge that the principal offender is doing something or is about to do something which amounts to an offence. We have already referred to Johnson v. Youden ... and the other cases in which this point is made clearly. The same point was expressed differently but with equal clarity by Lord Goddard C.J. in Thomas v. Lindop ... , where he said:
“More than once this Court has pointed out that it is impossible to convict persons of aiding and abetting the commission of an offence unless they know the facts which must be proved to show that an offence has been committed … . It is, of course, not necessary to show that the person knew that it was an offence, because he cannot plead ignorance of the law, but where anyone is charged with aiding and abetting a person to commit an offence, it must, at least, be shown that he knew what that person was doing. A person who does not know of the acts which another person is doing cannot be charged with aiding and abetting him because he does not know that he is doing acts which amount to an offence.”
See also Pereira v Director of Public Prosecutions (1988) 82 ALR 217.
It is important to note that when, in Giorgianni, Wilson, Deane and Dawson JJ referred to, “a secondary participant (who) lacks knowledge that the principal offender is doing something or is about to do something which amounts to an offence”, their Honours were not suggesting that the alleged accessory had to know that the relevant circumstances constituted a contravention of the law. Such a proposition would have been quite inconsistent with Lord Goddard’s observation concerning ignorance of the law, with which observation their Honours apparently agreed. We make this point because, in some of the other cases concerning the question similar, superficially ambiguous passages appear. In our view, it is settled that in general, it is not necessary to prove knowledge of the law, or knowledge that a particular fact situation attracts legal consequences. That proposition applies to the proof of both principal and accessorial liability. Of course, the Parliament may legislate to contrary effect.
Using the broad language of Mason J in Giorgianni at 494, the necessity of a “link” between the alleged accessory and the principal offender will not be established if the facts known to the alleged accessory demonstrate an apparently innocent act. In Giorgianni the unknown facts concerned the brake defects, not knowledge of the relevant law. In Yorke v Lucas, the absent knowledge was the misleading or deceptive nature of the representations, again not absence of knowledge of the relevant law. The point is that the provisions which establish accessorial liability, civil or criminal, generally use expressions such as “knowingly concerned in” or “aiding and abetting”. Those provisions have traditionally been construed as requiring actual knowledge of all relevant circumstances. This requirement comes from such accessorial provisions, not from the provisions creating the relevant principal contravention. As a result, it is not uncommon for accessorial liability to depend upon knowledge, proof of which is not required in order to prove the contravention as against the principal offender.
CONSTRUCTION OF SECTION 727 AND PART 6D.2
Section 727 provides:
Offer of securities needs lodged disclosure document
(1)A person must not make an offer of securities, or distribute an application form for an offer of securities, that needs disclosure to investors under Part 6D.2 unless a disclosure document for the offer has been lodged with ASIC.
Offer form to be included in or accompanied by disclosure document
(2)A person must not make an offer of securities, or distribute an application form for an offer of securities, that needs disclosure to investors under Part 6D.2 unless:
(a) if a prospectus is used for the offer—the offer or form is:
(i) included in the prospectus; or
(ii) accompanied by a copy of the prospectus; or
(b)if both a prospectus and a profile statement are used for the offer—the offer or form is:
(i) included in the prospectus or profile statement; or
(ii) accompanied by a copy of the prospectus or profile statement; or
(c)if an offer information statement is used for the offer—the offer or form is:
(i) included in the statement; or
(ii) accompanied by a copy of the statement.
...
Non quoted securities—waiting period after lodgment before processing applications for securities
(3)A person must not accept an application for, or issue or transfer, non quoted securities offered under a disclosure document until the period of 7 days after lodgment of the disclosure document has ended. ASIC may extend the period by notice in writing to the person offering the securities. The period as extended must end no more than 14 days after lodgment.
Simple corporate bonds
(3A)Subsection (3) does not apply in relation to an offer of securities under a 2 part simple corporate bonds prospectus if the securities are in the same class as existing securities that are quoted on a prescribed financial market immediately before the application period for the prospectus but for differences as to:
(a)the fixed term of the securities (if any); or
(b)the rate at which interest is payable under the securities; or
(c)the dates on which the holders are to be paid interest under the securities.
Issue or transfer not to breach section 708 ceiling
(4)If a person relies on subsection 708(1) to make offers of securities without disclosure to investors under Part 6D.2, the person must not issue or transfer securities without disclosure to investors under that Part if the issue or transfer would result in a breach of the 20 investors ceiling or the $2 million ceiling (see subsections 708(3), (4), (5), (6) and (7)).
Circumstances in which a person is taken not to contravene this section
(5) If:
(a)a person relies on subsection 708AA(2) or 708A(5) to make offers of securities for issue or sale without disclosure to investors under Part 6D.2; and
(b)the notice given under that subsection purported to comply with subsection 708AA(7) or 708A(6) but did not actually comply with subsection 708AA(7) or 708A(6);
the person is taken not to contravene this section.
At first instance, the case was conducted upon the basis that proof of the s 727(1) contraventions would effectively constitute proof of the s 727(2) contraventions, at least for the purpose of establishing accessorial liability. See the judgment at [290]‑[291] and [452]‑[453]. The appeal was conducted on the same basis. We proceed accordingly.
Section 727(1) proscribes particular conduct. By virtue of other provisions in the Corporations Act, any contravention of that section is a criminal offence. The proscribed conduct is offering securities or distributing application forms for such an offer. However not all such offers or distributions are proscribed. The proscription relates only to an offer which needs disclosure under Pt 6D.2 and then, only if no disclosure document has been lodged with ASIC. Part 6D.2 defines the circumstances in which there must be disclosure and prescribes the form that such disclosure must take. Section 727(1) does not refer to any particular section contained in Pt 6D.2, but to the Part as a whole, suggesting that the overall effect of Pt 6D.2 must be that the offer, “needs disclosure to investors under Part 6D.2”.
In Pt 6D.2, s 706 provides:
An offer of securities for issue needs disclosure to investors under this Part unless section 708 or 708AA says otherwise.
Relying upon this section, ASIC submits that Pt 6D.2 establishes a general rule requiring disclosure, to which there are exceptions. In Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1 at [35]‑[40], Martin J adopted that approach, leading to the conclusion that in proceedings brought by ASIC, alleging infringement of s 727, it was for the respondent to prove that the exceptions were engaged. The primary Judge, at [242]‑[246], appears to have adopted the same approach.
As we read Pt 6D.2, it deals separately with offers of securities for issue (in ss 706, 708 and 708AA), and offers of securities for sale (in ss 707, 708 and 708A). Thus it seems that there must be at least two general rules (one established by s 706 and the other, by s 707) and two sets of exceptions. Alternatively, it might be said that the “rules” established by Pt 6D.2 are:
·for an offer of securities for issue, those prescribed by ss 706, 708 and 708AA; and
·for an offer of securities for sale, those prescribed by ss 707, 708 and 708A.
Such an approach would be consistent with the reference in s 727 to an offer needing “disclosure to investors under Pt 6D.2” and the similar usage in ss 706, 707 and elsewhere in Pt 6D.2.
Neither s 706 nor s 707 can operate without reference to s 708 and either s 708AA or s 708A. Section 706 does not, in terms, provide that all offers need disclosure. The “general rule” is that all offers require disclosure other than as provided in s 708 and s 708AA. Similarly s 707 (itself a very complex section) is subject to s 708 and s 708A.
It is easy enough to assert that ss 706 and 707 establish general rules, and that subsequent sections offer exceptions. However one must guard against arbitrary classification. The classification depends upon the proper construction of Pt 6D.2. In Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249, especially at 257‑258 (per Dawson, Toohey and Gaudron JJ), the High Court considered a similar question. Great importance was attached to the fact that the proceedings were criminal in nature. This consideration militated against the adoption of a construction which led to the imposition of an evidentiary burden on the defendant. Further, the matters treated as relevant to the proper construction of the relevant provisions went well beyond the wording of the statutory provisions. The contravention to be proven in the present case is also criminal in nature. As we have said, s 727, itself, focusses on the effect of Pt 6D.2 rather than the operation of any individual section.
The approach taken in Chugg was applied more broadly by French CJ in Momcilovic v The Queen (2011) 245 CLR 1. At [44] his Honour said:
The common law “presumption of innocence” in criminal proceedings is an important incident of the liberty of the subject. The principle of legality will afford it such protection, in the interpretation of statutes which may affect it, as the language of the statute will allow. A statute, which on one construction would encroach upon the presumption of innocence, is to be construed, if an alternative construction be available, so as to avoid or mitigate that encroachment. On that basis, a statute which could be construed as imposing either a legal burden or an evidential burden upon an accused person in criminal proceedings will ordinarily be construed as imposing the evidential burden.
Heydon J may have been expressing a similar view when, at [467], his Honour spoke of the unpalatable nature of reversal of the onus of proof in criminal matters. The other members of the Court seem not to have addressed this aspect of the case. See also R v Hunt [1987] 1 AC 352 at 374, per Lord Griffiths, Lord Keith of Kinkel and Lord Mackay of Clashfern concurring. At 386, Lord Ackner indicated that his separate reasons were substantially the same as those of Lord Griffiths.
In the present case, there is no compelling reason for construing Pt 6D.2 and s 727 as imposing any probative onus upon an accused contravener. In those circumstances we are inclined to the view that the onus is not on the alleged contravener to prove the operation of s 708 and s 708AA. However he or she would bear an evidentiary onus, requiring that he or she lead evidence, or point to some aspect of the prosecution evidence, which raises the issue. If that evidentiary onus were satisfied, ASIC would have to exclude such operation of the “exceptions”. Neither Ms Gore nor any of the other respondents alleged that s 708 or s 708AA was engaged. Nor did any of them challenge ASIC’s contention that the offers required disclosure to investors and lodgement with ASIC. Ms Gore has not pointed to any evidence which might discharge the evidentiary onus.
There may be another reason for concluding that ASIC bore the burden of proof concerning the operation of ss 708 and 708AA, at least in connection with the declaratory relief. In JD Heydon, Cross on Evidence (Australian ed) the author states at [7070]:
In the case of relief by declaratory order, the party seeking the declaration has the burden of proof of any matter which is a necessary element of the declaration sought “(even if in proceedings by that party for relief of another kind, or in proceedings by the other party, that matter would not arise unless raised (and the burden of proof consequently assumed) by the other party).”
Where a party seeks a negative declaration (eg a declaration that an acquisition will not contravene s 50 of the Competition and Consumer Act 2010 (Cth)), that party bears the onus of proving that negative proposition.
(Footnotes omitted.)
There is ample authority for these propositions. See Hume v Monro (No 2) (1943) 67 CLR 461 at 474, Blanch v British American Tobacco Australia Services Ltd (2005) 62 NSWLR 653 at 658‑660 and Warner v Hung (No 2) (2011) 297 ALR 56 at [46]‑[48]. See also the decision of French J (as his Honour then was) in Australian Gas Light Company v Australian Competition and Consumer Commission (2003) 137 FCR 317 at [355]‑[356]. In Warner, Emmett J said at [46]‑[47]:
46As a general rule, the burden of proof of a fact that is an essential element in a claimant's cause of action lies on the claimant. A party who seeks relief has the burden of satisfying the Court of facts that, in the absence of proof of other facts, would justify the grant of that relief. What those facts might be will depend on the nature of the relief sought and the operation of any relevant presumptions. In the case of relief by declaratory order, the precise terms of the declaration sought assume particular significance. Thus, the party seeking a declaratory order has the burden of proof of any matter that is a necessary element of the declaration sought, even if, in a proceeding by that party for relief of another kind, or in a proceeding by the other party, that matter would not arise unless raised, and the burden of proof consequently assumed, by that other party (see Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 at 660).
47Putting it another way, when a person commences a declaratory proceeding, that person bears the legal onus of proof. That is so even though the majority of the facts that are relevant may be in the opposing camp. It is for the claimant to establish the ambit of the rights to be declared, and to prove all the facts necessary to enable the declaration to be made (see Blanch v British American Tobacco Australia Services Ltd (2005) 62 NSWLR 653 at 655). When a party seeks a negative declaration, such as, for example, a declaration that an acquisition will not contravene s 50 of the Competition and Consumer Act 2010 (Cth), that party bears the onus of proving that negative proposition (see Australian Gas Light v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317 at [355]-[356]).
That there may be a special probative burden in connection with declaratory relief does not necessarily mean that in order to obtain the other relief sought in this case, the onus was on ASIC to exclude the operation of ss 708 and 708AA. ASIC could have established an entitlement to such other relief without seeking or obtaining declaratory relief. In any event, the point was not taken at the trial or on appeal.
WAS ACCESSORIAL LIABILITY PROVEN?
We once again set aside any question concerning the operation of the Criminal Code. At [254] the primary Judge identified the elements of the s 727(1) offence as:
·the alleged contravener made an offer of securities or distributed an application for an offer of securities;
·the offer needed disclosure to investors under Pt 6D.2; and
·no prospectus, profile statement or offer information statement had been lodged with ASIC.
Although we would not necessarily express the elements of the s 727 offences in identical language, we take issue only with his Honour’s articulation of the second element. In our view, it should not be understood as meaning or implying that the principal contravener needed to know that Pt 6D.2 led to such necessity or that Pt 6D.2 even existed. The facts to be proven were those which would engage Pt 6D.2.
At [288] his Honour said that none of the defendants had contested ASIC’s contention that each of the SPG and WPO offers necessitated the provision of a disclosure document to offerees and its lodgment with ASIC. For present purposes, however, the relevant question is as to Ms Gore’s knowledge. The primary Judge concluded at [451] that Ms Gore needed only to know that the offers were being made, or that the application forms were being distributed, and that no disclosure document had been lodged with ASIC. His Honour based this conclusion upon the decision of the Full Court in Rafferty v Madgwicks (2012) 203 FCR 1, particularly at [257]‑[258].
In Rafferty the relevant question was whether a firm of solicitors was involved in a contravention of the Trade Practices Act 1974 (Cth). The case concerned an alleged contravention of the Franchising Code of Conduct (Cth) (the “Franchising Code”). Pursuant to the Franchising Code, a franchisor had to give certain documents to a prospective franchisee at least 14 days before the latter entered into a franchise agreement, or any agreement to enter into such an agreement. The solicitors advised that the proposed agreement would not be a franchise agreement. As a result, the documents were not provided. In proceedings alleging contravention of the relevant legislation, the solicitors were joined upon the alleged basis that they were involved in the contravention. At first instance the primary Judge held that the solicitors did not know that “the Franchising Code applies to or in relation to the agreements”. The Full Court considered that such approach was wrong, and that it was not necessary that the applicants show that the solicitors knew that the Franchising Code applied. However it was necessary that they show that the solicitors knew that the relevant party was entering into a franchise agreement, or an agreement to enter into such an agreement. At [257]‑[258] the Full Court said:
257Where the Franchising Code is the applicable industry code, the existence of a franchise agreement, or an agreement to enter into a franchise agreement is the sine qua non of any contravention of s 51AD. Thus in order for Madgwicks to hold the requisite intent, Madgwicks had to be aware that T2SA in the case of the RA, and Embleton in the case of the HOA, were entering into a franchise agreement and an agreement to enter a franchise agreement respectively. Consistently with Rural Press, Madgwicks was not required to make the correct legal judgment that the Code applied, nor was Madgwicks required to know that the relevant conduct was a contravention of s 51AD. However, Madgwicks was required to know that the RA was a franchise agreement and the HOA was an agreement to enter a franchise agreement.
258Accordingly, having regard to our identification of the essential elements of the s 51AD contraventions in this case, we accept, as the Rafferty parties submitted, that, in order to establish that Madgwicks fell within s 75B as a person involved in the contraventions of s 51AD by T2SA and Embleton, it was not necessary for the Rafferty parties to establish that Madgwicks knew that the Code applied to or in relation to the RA and the HOA. It was, however, necessary for Madgwicks to know, with respect to the RA, that T2SA was entering into a franchise agreement and, with respect to the HOA, that Embleton was entering into an agreement to enter into a franchise agreement. In view of our conclusion on this point, it is unnecessary to address the submissions of the Rafferty parties that essential elements of a contravention could only be composed of matters of fact and not matters of fact and law.
Clearly, the Court considered that it was not necessary to prove that Madgwicks knew of any aspect of the Franchising Code or the relevant legislation. It is perhaps a little unclear as to whether Madgwicks had to know that the relevant proposed agreement was a franchise agreement in the sense in which that description is generally used, or whether they had to know that it was a franchising agreement according to a definition in the Franchising Code. However, even in the latter case, it seems that Madgwicks would only have had to know the facts which led to the engagement of the relevant provisions. The categorical rejection of the proposed need for any knowledge concerning the legislation and the Franchising Code cannot have any other result. After considering the evidence concerning that issue at [260]‑[267], the Full Court concluded that the solicitors did not know that the proposed agreements had that character.
It follows that in this case, ASIC would have to prove that Ms Gore knew that the offer had the characteristics which would engage Pt 6D.2. ASIC would not have to prove that she knew of the requirements contained in either s 727(1) or Pt 6D.2. In our view, ASIC had to prove that Ms Gore knew:
·that an offer of securities was made or an application for an offer was distributed;
·the facts which created the need for disclosure, that is, in the absence of any reliance on s 708 or s 708AA, the content of the offer by reason of which it was an “offer of securities for issue”; and
·that no disclosure document had been lodged with ASIC.
The primary Judge considered it to be “incongruous” that against a principal contravener ASIC had to prove three matters, and against an alleged accessory, it had to prove knowledge of all three, but in fact had only to prove knowledge of two, the offer or distribution and the failure to lodge the relevant documents with ASIC. At [427] his Honour summarized ASIC’s case as follows:
ASIC submitted that proof of the accessory involvement of the MOGS defendants in the contravention of s 727(1) required it to establish only that those defendants knew the matters which gave rise to the contravention, namely, that there had been an offer of securities or the distribution of an application form for an offer of securities and that no disclosure document had been lodged with ASIC. It contended that it was it not necessary for it to establish, in addition, that the MOGS defendants knew that the offers needed disclosure to investors under Pt 6D.2 and, in particular, that it was not necessary for it to establish that none of the exemptions contemplated by s 708 was available.
We have previously sought to demonstrate that neither Giorgianni nor Yorke v Lucas required that it be proven that an alleged accessory knew of the relevant legal provisions which rendered the principal contravener’s conduct unlawful. Those decisions establish only that it must be proven that the alleged accessory knew the relevant factual matters leading to illegality. The decision in Rafferty is to similar effect. To require more would be inconsistent with the long‑established proposition that ignorance of the law is no defence. The relevant knowledge in this case is knowledge of the facts which led to the need for disclosure, not that such disclosure was required by Pt 6D.2, or even that it existed. In this case, knowledge of the content of the offer was proof of the need for disclosure. Thus it was necessary that ASIC prove that Ms Gore knew that content.
The apparent incongruity is explained by the difference between our view as to the content of the second element of the offence and that expressed by the primary Judge. His Honour considered that the second element was that the offer needed disclosure pursuant to Pt 6D.2, following the literal words of s 727(1). In our view, it was that there were facts which engaged the provisions of Pt 6D.2. His Honour’s approach fell foul of the rule that ignorance of the law is no excuse and, in our view, was not required by the language of s 727(1) which can be readily construed in the manner which we have identified. Our approach does not contain that defect.
Having regard to the evidence which was before the primary Judge, and subject to our subsequent discussion of Ch 2 of the Criminal Code, we consider that the primary Judge properly concluded that:
·there had been an offer of securities and/or distribution of an application for such an offer;
·in circumstances in which there was need for the lodgment of a disclosure document, those circumstances being the contents of the offer;
·no disclosure document had been lodged; and
·Ms Gore knew those matters.
THE CRIMINAL CODE
As Rares J has demonstrated, Ch 2 of the Criminal Code applies to the s 727 offences. His Honour has also explained the operation of Ch 2 in the present case. The matters to be proven against Ms Gore included the physical and fault elements identified by the application of Ch 2 to s 727. It may be arguable that s 1308A of the Corporations Act, in applying s 11.2 of the Criminal Code (dealing with parties to an offence) excludes the operation of s 79 and those parts of s 1324 of the Corporations Act which deal with accessorial liability. Such an approach might achieve a more coherent approach to the application of Ch 2 to offences under the Corporations Act. However the better view is that s 1308A applies Ch 2 of the Criminal Code only to offences. It has no application to accessorial liability under s 79 or s 1324, at least where accessorial liability does not, of itself, constitute an offence.
In R v Donaldson (2009) 103 SASR 309 the Full Court of the Supreme Court of South Australia considered the application of Ch 2 of the Criminal Code to the s 727 offences. At [45] Duggan J identified the physical elements of the s 727(1) offence as:
1. An offer was made to an investor.
2. The offer was in relation to a security.
3.The offer was of such a nature as to require disclosure to the investor of the information prescribed by Part 6D.2 of the Corporations Act.
4. There was a failure to lodge a disclosure document with ASIC.
We doubt whether any purpose is served by treating the offer and the subject of the offer as different physical elements. It may be that in a jury trial, it would be easier, in directing the jury, to break down the offence in that way. Logically, however, a description of the act of offering or distribution necessarily involves identification of the object offered or distributed. In this case, that object can only be fully described, having regard to the provisions of Pt 6D.2. We also consider that, at least in theory, it is not necessary to show that an offer was made “to an investor”. Section 727(1) does not so provide. The reference to “investors” in s 727(1) is to notional investors to whom disclosure must be made pursuant to Pt 6D.
The process of identifying the elements of an offence, without regard to Ch 2 of the Criminal Code, is not necessarily the same process as is required in identifying the physical and fault elements of an offence pursuant to that Chapter. However, the physical elements of the offence pursuant to the Criminal Code, are that:
·an offer of securities was made or an application form was distributed;
·there was a need for disclosure pursuant to Pt 6D.2; and
·no disclosure document was lodged with ASIC.
Again, the requirement was that the facts leading to the need for disclosure be established, not the principal contravener’s knowledge of those facts or of the effect of Pt 6D, or even of its existence. Section 727(1) and Pt 6D.2 do not identify the relevant fault elements of the offence. Hence s 5 of the Criminal Code applies. Of the physical elements, the first is a matter of conduct, and so the fault element is, by default, intention, meaning intention to make the relevant offer or distribute the application. The second and third elements may be either states of affairs (and therefore conduct) or circumstances in which conduct, or a result of conduct occurs. For conduct the default fault element is intention. For a circumstance the default fault element is recklessness. The basis for distinguishing between a state of affairs and a circumstance is unclear. However s 4.2 of the Criminal Code provides that conduct can only be a physical element if it is voluntary, being the “product of the will of the person whose conduct it is”. To be relevant for the purposes of the Criminal Code, a state of affairs must be voluntary in the sense in which s 4.2 uses that term. It is possible that a particular factual situation might be characterized as a state of affairs, if voluntary, but as a circumstance, if not voluntary, assuming that the nature of the particular situation permits either characterization. There may be circumstances in which a state of affairs is clearly not a circumstance and vice versa.
At this point we should stress that one must distinguish clearly between the physical and fault elements required to be proven as against the principal contraveners (which matters are governed by Ch 2 of the Criminal Code) and the knowledge necessary in order that Ms Gore be found to be an accessory to the contravention of s 727(1) (which matter is regulated by s 1324 of the Corporations Act and the cases to which we have referred). As against both the principal contraveners and Ms Gore, ASIC had to prove the three physical elements and the fault elements. It may have been difficult for ASIC to prove that the requirement for disclosure arose as the product of the wills of the principal contraveners. It may also have been difficult for ASIC to prove that the failure to lodge a disclosure document was a product of their respective wills. It is more likely that those matters were the products of Mr Gore’s will. Hence they should be treated as circumstances rather than states of affairs, the default element being, in each case, recklessness.
Section 5.4 of the Criminal Code provides:
(1) A person is reckless with respect to a circumstance if:
(a)he or she is aware of a substantial risk that the circumstance exists or will exist; and
(b)having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
(2) A person is reckless with respect to a result if:
(a) he or she is aware of a substantial risk that the result will occur; and
(b)having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
(3) The question whether taking a risk is unjustifiable is one of fact.
(4)If recklessness is a fault element for a physical element of an offence, proof of intention, knowledge or recklessness will satisfy that fault element.
Section 5.2 defines “intention” as follows:
(1)A person has intention with respect to conduct if he or she means to engage in that conduct.
(2)A person has intention with respect to a circumstance if he or she believes that it exists or will exist.
(3)A person has intention with respect to a result if he or she means to bring it about or is aware that it will occur in the ordinary course of events.
Section 5.3 defines “knowledge” as follows:
A person has knowledge of a circumstance or a result if he or she is aware that it exists or will exist in the ordinary course of events.
The effect of these provisions is that recklessness may be proven, not only by proving recklessness, but also by establishing intention or knowledge, fault elements which might generally be considered to be more serious than recklessness. For reasons which we have given in connection with s 4.2 of the Criminal Code, it is unlikely that, with respect to the second and third physical elements, ASIC could prove intention as against the principal contraveners. Thus it seems that ASIC had to prove that the principal contraveners knew, or were reckless as to whether disclosure was needed and as to whether a disclosure document had been lodged.
As against Ms Gore, ASIC had to prove that she knew not only the physical elements established as against the principal contraveners, but also that they were reckless as to the requirement for disclosure, and as to whether lodgment had occurred, or knew such matters. It may be possible to argue that the requirement for “knowledge of the essential facts constituting the contravention” would be satisfied if Ms Gore knew that the principal contraveners made offers or distributed applications, that the offers needed disclosure and that there had been no disclosure, even if she did not know that the principal contraveners knew, or had been reckless as to such matters. However such an approach would raise the possibility that a person could be an accessory in the absence of a contravention.
We should say something about the decision of the Court of Appeal of New South Wales in R v JS (2007) 230 FLR 276. In that case, the accused was charged with a breach of s 39 of the Crimes Act 1914 (Cth) (the “Crimes Act”). That section provided:
Any person who, knowing that any book, document, or other thing of any kind, is or may be required in evidence in a judicial proceeding, intentionally destroys it or renders it illegible or undecipherable or incapable of identification, with intent thereby to prevent it from being used in evidence, shall be guilty of an offence.
Section 31 of the Crimes Act, provided that the term “judicial proceeding” meant:
Judicial proceeding means a proceeding in or before a federal court, court exercising federal jurisdiction or court of a Territory, and includes a proceeding before a body or person acting under the law of the Commonwealth, or of a Territory, in which evidence may be taken on oath.
It seems that in isolating the physical and fault elements of the s 39 offence, the prosecution submitted that whether proceedings were “federal” was a question of law for the judge, not the jury to determine. The Court rejected that proposition, holding that the Criminal Code necessarily applied to the elements of the offence as identified in the provision which established it. Although the decision has some similarity to the exercise which we have performed with respect to Ch 2 of the Criminal Code, it has no real present relevance.
CONCLUSION
The impact of the Criminal Code upon these proceedings was not raised at first instance, and so was not considered. Although we are able to identify the physical and fault elements of the relevant offences, it would be difficult for this Court to relate the evidence to those elements. The matter would almost certainly have to be remitted for further hearing. It is also possible that, with knowledge of the matters to be proven pursuant to the Criminal Code, Ms Gore would choose to give evidence. The present options are:
·to uphold the finding at first instance, notwithstanding the failure to have regard to the Criminal Code; or
·to remit the matter for determination in accordance with the law.
If these proceedings were for a criminal offence, we would send the matter back for reconsideration. Notwithstanding the fact that the parties conducted the case in a particular way, it would be inappropriate for a conviction to have been recorded for an offence which was, in effect, unknown to the law. However proceedings alleging accessorial “liability” pursuant to s 1324 are not of that nature. Given the purely civil nature of the proceedings, we see no obstacle to allowing the result to stand, based as it is upon the way in which the parties chose to conduct the case at first instance. We would dismiss grounds 1 to 6 of the amended notice of appeal.
As to the duration of the injunction, we have concluded that the primary Judge correctly found that Ms Gore was knowingly concerning in contraventions of s 727. Hence a primary basis for Ms Gore’s appeal concerning that matter disappears. To the extent that Ms Gore submitted that the period was otherwise excessive, we agree with the reasons and conclusions reached by Rares J. We consider that the question depended upon the view of the primary Judge as to how the public could best be protected, having regard to the totality of her misconduct. The accessorial findings concerning s 727 would have had little impact on that question. As to the cross‑appeal, we also agree with his Honour’s reasons and conclusions. In our view, Ms Gore’s conduct in connection with the contraventions of s 727 was part of a larger scheme. We consider that the primary Judge’s decision adequately reflected her overall culpability.
As to the costs at first instance, our conclusions concerning the s 727 issues dispose of a primary basis for Ms Gore’s attack on his Honour’s orders. His Honour was in a better position, than are we, to determine the question. No basis has been demonstrated for varying such orders.
The appeal and cross‑appeal should be dismissed. The appellant should pay the respondent’s costs of the appeal. The cross‑appellant should pay the cross‑respondent’s costs of the cross‑appeal.
I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Dowsett and Gleeson. Associate:
Dated: 13 February 2017
REASONS FOR JUDGMENT
RARES J:
Table of Contents
Introduction
[58]
The statutory scheme
[63]
The primary judge’s decisions
[74]
The relief reasons
[145]
The issues on the appeal and cross appeal
[156]
The accessorial liability issue – ASIC’s submissions
[157]
A new issue arises ‑ the Criminal Code
[159]
The accessorial liability issue – consideration
[163]
Accessorial liability
[163]
Essential elements of a contravention of s 727(1)
[178]
Knowledge of the essential elements of the contravention
[187]
Rafferty
[219]
Adler
[223]
The inferred knowledge issue – Mrs Gore’s submissions
[230]
The inferred knowledge issue – consideration
[235]
Alternate analysis under Ch 2 of the Criminal Code
[241]
The knowledge of the representation issue – Mrs Gore’s submissions
[251]
The knowledge of the representation issue – consideration
[252]
The length of the injunction issue – the parties’ submissions
[265]
The length of the injunction issue – consideration
[277]
The costs issue – Mrs Gore’s submissions
[310]
The costs issue – consideration
[311]
The costs of the appeal and cross appeal
[313]
Introduction
Marina Gore (Mrs Gore) has appealed against the primary judge’s declarations that she was knowingly concerned in four contraventions by various principal contravenors of s 727(1) and (2) of the Corporations Act 2001 (Cth) (to which generally, for simplicity, I will refer as “the Act”) and two contraventions of both s 1041H of that Act and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) and against his Honour’s orders that, first, she be enjoined for 7½ years from, in effect, carrying on business in the financial services industry, and, secondly, she pay 80% of 95% of the costs of the Australian Securities and Investments Commission (ASIC) from the time of her joinder as fifteenth of eighteen defendants in the proceedings below. ASIC has cross appealed against the term of the injunction complaining that it was manifestly inadequate.
The principal contravenors made various offers of securities, in two private placement memoranda (PPM) using corporate vehicles incorporated in the British Virgin Islands (BVI) and a website located in the Cayman Islands. The primary judge found that each PPM was in the nature of a prospectus for the issue of shares to investors, and that no prospectus or other “disclosure document” had been lodged with ASIC in accordance with Pt 6D.2 of the Act. It will be necessary to explain the factual background in more detail below. However, there are essentially three issues that arise in Mrs Gore’s appeal.
First, his Honour held that ASIC had failed, but did not need, to prove for the purposes of establishing her accessorial liability, that Mrs Gore knew one of the three factual elements that constituted a contravention of s 727(1) and (2). That element was that an offer for securities needed disclosure to investors under Pt 6D.2 of the Act (in which s 727 was located). If Mrs Gore had to know that the offers for securities needed disclosure to investors under Pt 6D.2, then his Honour’s finding that she was an accessory to the principals’ contraventions of s 727 cannot stand. Mrs Gore also argued that his Honour erred in finding another element, namely that she knew that the offers for securities had not been lodged with ASIC.
Secondly, the primary judge held that Mrs Gore was knowingly concerned in making a representation conveyed by each of the offers for securities, namely that moneys invested by Australian self-managed superannuation funds (SMSFs) in the future would be used for the purchase of property by the offeror when each of those representations was misleading or deceptive or likely to mislead or deceive. His Honour found that Mrs Gore knew that the principals who made those representations did not have reasonable grounds for doing so and thus the representations were deemed to have been misleading (see: s 769C(1) of the Corporations Act; s 12BB(1) of the ASIC Act). Mrs Gore challenged the primary judge’s findings that she had actual knowledge that each PPM conveyed that representation and that it was made without reasonable grounds.
Thirdly, the primary judge held that the purpose of the remedy of an injunction in s 1324(1) was not to punish the person enjoined but rather was to protect the public. Mrs Gore complained that the term of the restraint on her was excessive. In contrast, ASIC argued that his Honour should have construed the power to enjoin to include a punitive aspect and that the 7½ year term of the restraint was manifestly inadequate.
The statutory scheme
Chapter 6D of the Corporations Act dealt with fundraising. Offering securities for issue included inviting applications for the issue of the securities (s 700(3)) and Ch 6D applied to offers received in Australia, regardless of where any resulting issue, sale or transfer occurred (s 700(4)). Any attempt to contract out of the application of Ch 6D was void by force of s 703. Part 6D.2 began with an “overview” in Div 1, where s 704 provided that, relevantly, ss 706, 707 and 708 “say when an offer for securities needs disclosure to investors under this Part”. There were four categories of disclosure documents that had to be used for offers that needed disclosure under Pt 6D.2 (s 705). Division 2 was headed “Offers that need disclosure to investors” and commenced with ss 706 and 707 that, relevantly, provided:
706 Issue offers that need disclosure
An offer of securities for issue needs disclosure to investors under this Part unless section 708 or 708AA says otherwise.
707 Sale offers that need disclosure
Only some sales need disclosure
(1)An offer of securities for sale needs disclosure to investors under this Part only if disclosure is required by subsection (2), (3) or (5).
Off market sale by controller
(2)An offer of a body’s securities for sale needs disclosure to investors under this Part if:
(a) the person making the offer controls the body; and
(b) either:
(i) the securities are not quoted; or
…
and section 708 does not say otherwise. (emphasis added)
By force of s 708, offers of a body’s securities did not need disclosure to investors under Pt 6D.2, relevantly, if all were personal offers and none of those offers would result in a breach of the 20 investors and $2 million ceilings. A personal offer could only be accepted by the person to whom it was made, the offer having been made to that person as someone likely to be interested in it, having regard to the offeree having indicated interest in offers of that kind or the offeree having had some prior contact, professional or other connection, with the offeror (s 708(2)). The two ceilings would be breached if, in any 12 month period, the offer resulted in the issue of securities to more than 20 people and the amount raised by the issuer exceeded $2 million (s 708(3)).
Ordinarily, if an offer of securities needed disclosure under Pt 6D.2, a disclosure document in the form of a prospectus or information statement had to be prepared (s 709(1)). Division 4 of Pt 6D.2 dealt with the required disclosure that any such disclosure document had to contain (ss 710-716). Next, Div 5 dealt with what a proposing offeror needed to do to make an offer that required disclosure, and s 718 required that a “disclosure document to be used for an offer of securities must be lodged with ASIC”.
Division 1 of Pt 6D.3, headed “Prohibitions and Liabilities”, contained s 727 which, relevantly provided:
727 Offering securities without a current disclosure document
Offer of securities needs lodged disclosure document
(1) A person must not make an offer of securities, or distribute an application form for an offer of securities, that needs disclosure to investors under Part 6D.2 unless a disclosure document for the offer has been lodged with ASIC.
Offer form to be included in or accompanied by disclosure document
(2) A person must not make an offer of securities, or distribute an application form for an offer of securities, that needs disclosure to investors under Part 6D.2 unless:
(a) if a prospectus is used for the offer - the offer or form is:
(i) included in the prospectus; or
(ii) accompanied by a copy of the prospectus; or
(b)if both a prospectus and a profile statement are used for the offer--the offer or form is:
(i) included in the prospectus or profile statement; or
(ii)accompanied by a copy of the prospectus or profile statement; or
(c)if an offer information statement is used for the offer--the offer or form is:
(i) included in the statement; or
(ii) accompanied by a copy of the statement.
Note: Sections, 707, 708, 708AA and 708A say when the offer needs disclosure to investors under Part 6D.2.
…
Issue or transfer not to breach section 708 ceiling
(4)If a person relies on subsection 708(1) to make offers of securities without disclosure to investors under Part 6D.2, the person must not issue or transfer securities without disclosure to investors under that Part if the issue or transfer would result in a breach of the 20 investors ceiling or the $2 million ceiling (see subsections 708(3), (4), (5), (6) and (7)).
Circumstances in which a person is taken not to contravene this section
(5) If:
(a)a person relies on subsection 708AA(2) or 708A(5) to make offers of securities for issue or sale without disclosure to investors under Part 6D.2; and
(b)the notice given under that subsection purported to comply with subsection 708AA(7) or 708A(6) but did not actually comply with subsection 708AA(7) or 708A(6);
the person is taken not to contravene this section. (emphasis added)
A person who contravened s 727(1), (2) or (4) committed a criminal offence by force of s 1311 and items 236, 237 and 239 of Sch 3 to the Corporations Act prescribed penalties for contravention of each of s 727(1), (2) and (4) of 200 penalty units or imprisonment for five years or both. It was common ground before the primary judge and in the appeal, that a finding in relation to an alleged contravention of s 727(1) would produce a similar finding about the contravention of s 727(2) in the identical factual situation. Thus, it was not necessary for his Honour or this Court to consider the application of s 727(2) separately and for brevity I will refer below only to s 727(1).
Division 7 of Pt 1.2 of the Corporations Act, headed “Interpretation of other expressions”, provided for accessorial liability in s 79 as follows:
79 Involvement in contraventions
A person is involved in a contravention if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b)has induced, whether by threats or promises or otherwise, the contravention; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d)has conspired with others to effect the contravention. (emphasis added)
Relevantly, s 1041H(1), which was in Pt 7.10 (and was in similar terms to s 12DA(1) of the ASIC Act to which I need not separately refer again), provided:
1041H Misleading or deceptive conduct (civil liability only)
(1)A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.
Note 1: Failure to comply with this subsection is not an offence.
Note 2:Failure to comply with this subsection may lead to civil liability under section 1041I. For limits on, and relief from, liability under that section, see Division 4.
For the purposes of Ch 7 of the Corporations Act, s 769C (which was in similar terms to s 12BB(1) of the ASIC Act to which I need not separately refer again) provided that if a person made a representation with respect to a future matter and the person did not have reasonable grounds for doing so, the representation was taken to be misleading.
The Corporations Act and the ASIC Act conferred powers in numerous sections on the Court to make orders in respect of contraventions. Relevantly, s 1101B(1) provided that on an application by ASIC, the Court could make such orders as it saw fit if, first, it appeared that a person had contravened a provision of Ch 7 and, secondly, the Court were “satisfied that the order would not unfairly prejudice any person”. Some examples of orders that the Court could make under s 1101B(1) appeared in s 1101B(4).
Part 9.5 of the Corporations Act also conferred powers on courts. In particular, s 1324(1) (which was in relevantly similar terms to s 12GD of the ASIC Act to which I need not separately refer again) conferred power on the Court to grant an injunction as follows:
1324 Injunctions
(1)Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:
(a) a contravention of this Act; or
(b) attempting to contravene this Act; or
(c)aiding, abetting, counselling or procuring a person to contravene this Act; or
(d)inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f) conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing. (emphasis added)
In proceedings, other than for an offence, s 1332 provided that the civil standard of proof, on the balance of probabilities, applied to establish, or satisfy the Court, for any purpose relating to a matter arising under the Act that a person had “contravened a provision of the Act” (s 1332(a)) or that “a person has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to a contravention [of] … a provision of this Act” (s 1332(d)).
The primary judge’s decisions
The primary judge delivered his principal reasons where he decided issues of liability (Australian Securities and Investments Commission v ActiveSuper Pty Ltd (In Liq) (2015) 235 FCR 181) before deciding the question of relief in his second set of reasons (Australian Securities and Investments Commission v ActiveSuper Pty Ltd (In Liq) (No 2) (2015) 106 ACSR 302 (the relief reasons)). The principal reasons are detailed and what follows is substantially a summary of the findings that his Honour made relating to the liability of Mrs Gore.
Mrs Gore was a director of MOGS Pty Ltd and a company associated with her was one of its shareholders. Her husband, Craig Gore (Mr Gore), worked as a consultant to MOGS. As at 2011, he had extensive corporate experience having been a director of over 100 companies.
Mark Adamson was a shareholder and, between 23 May 2011 and 23 April 2012, a director of MOGS. He was a lawyer who worked for Evans Ellis Lawyers and he performed a considerable amount of legal work for MOGS. From about August 2011, MOGS paid directly Mr Adamson’s and his secretary’s salaries, as employees of the law firm, as well as the firm’s overheads for its Gold Coast office, which was in the same premises as MOGS’ offices.
Graeme Stonehouse was also a director of MOGS and a company associated with him was one of its shareholders.
MOGS was a property developer that, principally, sold house and land packages to both non-SMSF and SMSF investors. In the second half of 2011, MOGS began to target sales to SMSFs and, by late that year, such sales accounted for over 50% of its business. MOGS engaged financial planners who dealt directly with the investors. Its business model involved it, or one of its subsidiaries, acquiring and then selling land to an investor on the basis that, for a non-SMSF investor, MOGS would co-ordinate the construction of a home on the land by a builder with whom MOGS had agreed the price. Initially, the non-SMSF investor would pay the purchase price of the land and then progress payments for the construction work. MOGS sought to achieve a profit of between $20,000 and $30,000 on each property.
However, because a superannuation fund could not borrow to finance construction of a building, MOGS only sold completed homes to SMSFs. Accordingly, when selling to SMSF investors, MOGS had to finance both the land acquisition and construction costs. As MOGS’ sales to SMSFs became an increasingly significant part of its business in the second half of 2011, its need for finance also increased. That was because it had to acquire the land and construct the house before completion could occur under its agreement with the SMSF investor. Usually, that process took about six months. MOGS found it difficult to raise the necessary finance and often was unable to make payments as and when they were due.
His Honour found that MOGS’ financing requirements and difficulties in the second half of 2011 largely explained the desire of those involved with MOGS to make use of funds invested by SMSFs in shares issued pursuant to the two PPMs in issue on this appeal, namely those PPMs issued by Syndicated Property Group Ltd (SPG) (the SPG PPM) and Worldwide Property Opportunities Ltd (WPO) (the WPO PPM), as well as funds raised by investments in a venture pursuant to what his Honour called the US Realty Memorandum. The latter US Realty Memorandum was an earlier fundraising, in which Mrs Gore was not a participant, but from the proceeds of which she and MOGS derived benefits. Each of SPG and WPO was incorporated in the BVI in late 2011.
On 23 November 2010, Mr Gore entered into a personal insolvency agreement with a trustee under Pt X of the Bankruptcy Act 1966 (Cth) under which he had to ensure that, relevantly, the recently incorporated GFCO9 Pty Ltd paid the trustee $1 million as an annual fee for three years by equal monthly instalments for the benefit of his creditors. On about 9 May 2011, MOGS and GFCO9 entered into a consultancy agreement under which MOGS agreed to pay GFCO9 a “base fee” of $2 million annually for the provision of Mr Gore’s services and Mr Gore had to be available to manage and co-ordinate the pursuit of, substantively, MOGS business as a property developer. The “base fee” for Mr Gore’s services was a very significant liability for MOGS, which only had net assets at 30 June 2011 and 2012 respectively of $29,000 and $150,000. As his Honour found, the consultancy agreement was not at arm’s length and, in order for MOGS to meet its obligation to pay the annual “base fee”, it had to increase its income considerably. Of course, GFCO9 and Mr Gore needed MOGS to do so in order for him to meet his obligation under the personal insolvency arrangement.
His Honour found that Mr Gore exercised considerable control and influence over MOGS’ affairs in the latter part of 2011 and early part of 2012. He also found that Mr Gore was the driving force behind the establishment of SPG, WPO and a Cayman Islands company, Cayco Management Ltd, that had been incorporated in January 2012. Mr Gore was made bankrupt on 18 April 2012.
Jason Burrows controlled ActiveSuper Pty Ltd and he also, together with Justin Gibson, exercised considerable control over Royale Capital Pty Ltd. In late 2010 Royale distributed the US Realty Memorandum to some SMSF investors promoting it as an investment opportunity. That document was entitled “US Deals Invest Now” and recommended that SMSFs to whom it was marketed acquire shares in an American company that would be formed to purchase “distressed” real estate in the United States with a view to it realising a profit after five years. Over 185 SMSF investors took up that “opportunity” and paid ActiveSuper a total of about $3.1 million for investment in it. His Honour found that only about $455,000 of that sum came to be invested in 14 properties in Arizona by four limited liability companies incorporated in the United States (the LLCs). No shares in the LLCs or any other entity were ever issued to any of the SMSF investors in respect of their investments.
On 12 September 2011, Mr Gore met Mr Burrows for the first time. Mr Gore then learnt that ActiveSuper was establishing about 10 new SMSFs each week. He told Mr Burrows that he was not aware of the “gold mine” on which he (Mr Burrows) was sitting. Mr Gore was not a man to let others sit idly on such treasures. He saw, as the primary judge found, the opportunities for MOGS to obtain money to finance its operations, as well as to sell properties to ActiveSuper’s and Royale’s SMSF clients.
By the first week of October 2011, Mr Gore had suggested that Royale could raise the $4 million in finance that MOGS needed and lend it to MOGS, secured by a fixed and floating charge over MOGS’ assets and personal guarantees from its directors. On 7 October 2011, Mr Gore, Mr Adamson and Mr Burrows, among others, had a meeting with Minter Ellison Lawyers, at which they discussed establishing a fund that would be regulated under the managed investments scheme provisions in the Corporations Act.
However, the primary judge found that by 12 October 2011 Mr Gore had come to the view that a fund not regulated by Australian law was preferable. At a meeting around this time at which, among others, Mr Adamson, Mr Stonehouse, Mr Burrows and Mr Gibson were present, Mr Gore suggested establishing a fund in the BVI. His Honour found that Mr Gore’s purpose from the inception of his scheme was to use entities in the BVI (the BVI scheme) to avoid the Australian regulatory regime and that Mr Adamson, Mr Stonehouse and Mr Burrows knew this. He inferred that “[Mrs] Gore must also have known of this purpose”.
On 14 October 2011, Mr Gore sent an email to Mrs Gore, Mr Adamson and others with a draft PPM for a pooled investment scheme established in the BVI. That draft became the basis for the WPO PPM. Mr Gore’s covering email said that there was a lot of work to be done and that the addressees and he should talk on the forthcoming weekend. Mrs Gore’s biography in the October 2011 draft PPM recorded that she was currently completing an executive MBA course at Bond University. The draft evolved considerably over the subsequent months. His Honour found that:
Some of the emails were also sent to Mr Stonehouse and Ms Gore. An email of 27 October 2011 from Mr Gore to Ms Gore, Mr Stonehouse, Mr Adamson and Mr Chant attached an Information Memorandum for Worldwide Property and Distressed Investment Opportunities Fund (WWPDIO Fund) and said:
I made these changes on the plane to NYC so they don’t include the changes and spelling that Marina made. Rather than me fucking it up by attempting to load them in I thought I could send them back to you and you could do so I don’t fuck up wat (sic) Marina has done.
The “Marina” to whom Mr Gore referred was Ms Gore. The email indicates that Ms Gore was providing active assistance in the development of the information memorandum. (emphasis added)
In fact, his Honour mistranscribed the emphasised passage in the email. The actual words in the email did not include the word “and” in the passage emphasised. Rather, Mr Gore wrote “they don’t include the changes in spelling that Marina made”. Mr Gore’s spelling and capacity to express himself in grammatical English was not his forte, as his Honour’s notation of “sic” in the quoted passage from Mr Gore’s email showed.
Nonetheless, apart from her visit to the BVI in 2012, referred to at [104]-[105] below, there was little evidence of Mrs Gore participating in the development of the PPMs. Mrs Gore used that evidentiary gap to argue that his Honour was wrong to infer that since each of Mr Adamson, Mr Stonehouse and Mr Burrows knew that Mr Gore’s purpose in conceiving the BVI scheme was to avoid the Australian regulatory regime, she “must also have known of this purpose”. However, it is not relevant to the issues in this appeal whether she knew that this was her husband’s purpose or not. That is because his Honour stated that he would not have been prepared to make a finding that Mrs Gore knew that the offers did require disclosure under Pt 6D.2 of the Corporations Act, had it been necessary for him to do so. ASIC did not raise a contention on the appeal that his Honour should have found that Mrs Gore knew the offers needed disclosure.
The primary judge recognised that if the construction of s 68(3) of the ASIC Act favoured by Gordon J were correct, rather than his own, the parties may have been affected. He decided not to invite further submissions because he said that “I have relied very little on the s 19 transcripts and I think it undesirable that judgment in this matter be prolonged.”
Having persuaded his Honour to that view, in order to benefit from its tender of Mrs Gore’s s 19 transcript, ASIC now argues, as it did when seeking final relief from his Honour, that the proceedings were indeed for the imposition of a penalty. ASIC’s blowing hot and cold on this significant point was not explained. ASIC stands in the position of the Crown and is bound by the same standards that Griffith CJ identified when a similar change of stance occurred in Melbourne Steamship Co Ltd v Moorehead (1912) 15 CLR 333 at 342. He said, in the following well-known passage that remains the position today:
It used to be regarded as axiomatic that the Crown never takes technical points, even in civil proceedings, and a fortiori not in criminal proceedings.
I am sometimes inclined to think that in some parts – not all – of the Commonwealth, the old-fashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects, which I learned a very long time ago to regard as elementary, is either not known or thought out of date. I should be glad to think that I am mistaken. (emphasis added)
ASIC made a deliberate forensic choice in seeking to tender and rely on the s 19 transcripts on the basis that the proceedings against all the 18 defendants were not “for the imposition of a penalty”. Having conducted itself during the trial on that basis, the other parties were entitled to expect that it would have remained consistent in its approach on the basis that Griffith CJ expressed. Nonetheless, because ASIC has argued that s 1324(1) should be used to impose a penalty on Mrs Gore, it is necessary to decide whether s 68(3) of the ASIC Act made her s 19 transcript inadmissible.
On its face, s 1324(1) is a provision of general application conferring power to the Court to grant an injunction on such terms as it thinks appropriate, if a jurisdictional precondition in any of subparagraphs (a)-(f) has been satisfied. The precondition is that an actual or attempted contravention of the Corporations Act has occurred or that a person has been an accessory or a party to a conspiracy to contravene the Act.
There are many situations in which an injunction could be sought and granted under s 1324(1) in which no-one could suggest that the proceeding in which that relief was sought was “for the imposition of a penalty”. For example, a liquidator might seek to enjoin a person claiming to be entitled to take an enforcement process against a company’s property contrary to s 471B or a shareholder might seek to enjoin the holding of a meeting of a company because of a contravention of the Act.
On the other hand, proceedings seeking to interfere with an important common law right of a person to carry on business (Wentworth v New South Wales Bar Association (1992) 176 CLR 239 at 252 per Deane, Dawson, Toohey and Gaudron JJ citing Commonwealth v Progress Advertising and Press Agency Co Pty Ltd (1910) 10 CLR 457 at 464 per O’Connor J) or to pursue his or her livelihood free from restraint of trade (as recognised in Buckley v Tutty (1971) 125 CLR 353 at 373 per Barwick CJ, McTiernan, Windeyer, Owen and Gibbs JJ) can have the character of being “for the imposition of a penalty”.
The principle that applies for construing s 1324(1) is that stated by Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ in Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 421 namely:
It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.
The general application of s 1324(1) should not be circumscribed by characterising proceedings in which relief is sought under s 1324(1) as presumptively purely remedial or, because of the potential reach of the section, capable of being “for the imposition of a penalty”. The section is inherently neutral in its potential reach. The prohibition in s 68(3) was directed to the purpose for which the proceedings were instituted, not to the range of possible uses that a statutory remedy, such as s 1324(1), might be conscripted by the applicant or court to serve.
A common law action in tort, in general, is not one that could be characterised as for the imposition of a penalty. But, if the plaintiff seeks punitive or exemplary damages, the character of the proceeding and the purpose of the remedy changes. As Mason CJ, Brennan, Deane, Dawson and Gaudron JJ said in Lamb v Cotogno (1987) 164 CLR 1 at 9:
The object, or at least the effect, of exemplary damages is not wholly punishment and the deterrence which is intended extends beyond the actual wrongdoer and the exact nature of his wrongdoing: see Uren v. John Fairfax & Sons Pty. Ltd. [(1966) 117 C.L.R., at p 138]; Luntz, Assessment of Damages for Personal Injury and Death, 2nd ed. (1983), pp. 66-67; Street, Principles of the Law of Damages (1962), pp. 33-34; cf. Costi v. Minister of Education [(1973) 5 SASR 328]. It is an aspect of exemplary damages that they serve to assuage any urge for revenge felt by victims and to discourage any temptation to engage in self-help likely to endanger the peace: cf. Merest v. Harvey [(1814) 5 Taunt. 442 [128 ER 761]].
Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ held in Rich 220 CLR at 146 [35] that it is erroneous to make an a priori classification of proceedings as being either protective or penal, since those categories are not necessarily mutually exclusive. They said there:
Just as a law may bear several characters, a proceeding may seek relief which, if granted, would protect the public but would also penalise the person against whom it is granted. That a proceeding may bear several characters does not deny that it bears each of those characters [Stone, Legal System and Lawyers’ Reasonings (1964), pp 248-252]. (emphasis added)
Here, the objective purpose for which ASIC sought relief against Mrs Gore under s 1324(1) was to prevent her from engaging in the earning of her livelihood for a future period, not just in the contravening manner she had acted, but also in any other way in a large field of activity that she otherwise could have pursued without contravening any law. ASIC, as a statutory regulator, sought that the latter consequence be inflicted on her on account of her wrongdoing in contravening the Act. If inflicted, the consequence of an injunction was a penalty: Rich 220 CLR at 144 [29], 147 [37].
The omission of s 1324 from the list of provisions in the Corporations Act, in which s 68(3) of the ASIC Act would not operate to prevent the admission into evidence of statements in or transcripts of a s 19 examination, was consistent with the reasoning in the joint judgment in Rich 220 CLR 129. The Parliament left s 1324(1) unfettered, but recognised that there would be proceedings where a s 19 transcript could be admitted into evidence (for example, where an investor sought an injunction and wished to use an admission in the transcript against the examinee to support that case) and others where it could not (for example, because a regulator sought the injunction to prevent the examinee engaging in otherwise lawful conduct by reason of his or her past contravention of the law that the statement in, or transcript of, the s 19 examination may tend to prove).
It follows that, where Mrs Gore claimed privilege in her s 19 examination, her statements made under that claim were not admissible against her in the proceedings below. However, even though, as a result of this conclusion, the proceedings against Mrs Gore were for the imposition of a penalty, his Honour dealt with her and all of the other defendants on the basis that he was not granting relief for the purposes of imposing a punishment.
In any event Mrs Gore did not appear to object to his Honour’s use of any part of the s 19 transcript. She referred to the matter only to demonstrate that ASIC had changed its position. In those circumstances, it is not necessary to identify and deal with any reliance on that transcript.
I have proceeded on the basis that where an injunction or similar order will have the effect of restraining conduct which would otherwise be lawful, or compelling conduct which the relevant person would not otherwise be obliged to perform, the order is punitive in effect, whatever the purpose for which it is imposed. Similarly, if an order restrains conduct which would otherwise be unlawful, or compels conduct pursuant to an existing duty, it is not punitive in effect. In this context I consider that the restraining order made against Mrs Gore (by virtue of order 19(n) of the orders made on 29 May 2015) was punitive in effect, although it was made for other purposes.
The primary judge made the restraining orders for the principal purpose of protecting the public. His Honour also had in mind denunciation and deterrence. He was not seeking to punish. I do not see any error in that approach. Nonetheless, as I have observed, such restraints are likely to have a punitive effect. Given that the principal purpose is protection of the public, the length of any restraint should identify a period which will serve that purpose but also recognise the need for denunciation and deterrence. Given that the primary purpose is protection, it may be that parity of treatment amongst co‑offenders is not as important as it is in connection with punishment. Nonetheless, it is still a relevant consideration. Apparent inconsistency may undermine the public’s confidence in the judicial system. The need to have regard to parity does not mean that the primary judge or an appellate court has to assume the correctness of the periods of restraint imposed on others who consented to that outcome and, as it were, start from that point. The mere fact that they consented to particular orders, or have not appealed against orders, does not mean that his Honour had to approach fixing Mrs Gore’s period of restraint upon any such assumption of correctness: cp: Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 326 ALR 476 at 490-492 [53]-[59] per French CJ, Kiefel, Bell, Nettle and Gordon JJ.
The primary judge’s six declarations comprised two courses of conduct, namely the use of each of the SPG and WPO PPMs to persuade vulnerable SMSF investors to part with some or all of their superannuation savings and invest them in shares issued by each of SPG and WPO on the faith of the misrepresentation that the money would be used by each for the purchase of property.
The misrepresentations in the PPMs as to how the investors’ money would be invested, to the extent that the investors acted on them, directly caused significant losses. The misrepresentation in each PPM was intended to induce the investors to entrust SPG and WPO with their money. The misrepresentations were intended to cause those misinformed investments. Mrs Gore’s participation, by her being knowingly concerned in the principal contravenors’ s 727 misconduct was no doubt motivated by a desire to avoid ASIC’s attention. It was open to his Honour to take that factor into account in assessing Mrs Gore’s overall culpability.
Mrs Gore was aware that she was assisting the principals and her husband, Mr Gore, to set up two fundraising schemes, using the SPG and WPO PPMs. Those schemes were to raise money, apparently outside Australia through BVI and Cayman Island entities, from Australian SMSF investors and that the moneys raised, or a substantial part of it, would then be used to fund the Australian company, MOGS, in Australia. Mrs Gore went to the BVI to assure herself that “what was being proposed in Australia could be done” (see [105] above). She considered that it was desirable that she ensure that, “what was being proposed in Australia” could be done overseas, perhaps because she understood that it could not be done in Australia. She assisted SPG, WPO and Cayco in putting forward in each PPM a representation that she knew to be false, for the purpose of inducing SMSF investors to invest in shares in SPG and WPO.
Mrs Gore assisted in the development of each PPM and its dissemination with that knowledge. She knew that the PPMs were to be used to raise money from Australian SMSFs, and that the principal contravenors proposed to lend or pay the proceeds, or a substantial part of the proceeds, of that fundraising to MOGS. That conduct was dishonest by the standards of ordinary decent people: cf Farah Constructions 230 CLR at 162 [173] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; see too: Peters v The Queen (1998) 192 CLR 493 at 504 [18] per Toohey and Gaudron JJ with whom Kirby J agreed at 556 [145].
Mrs Gore personally received $69,200 from Cayco, on 20 April 2012. That amount was paid into her United States bank account with Wells Fargo when both PPMs were still being used to raise funds. While his Honour did not identify the payees of all of the $2.4 million raised by SPG and WPO through the PPMs, the evidence provided a sound foundation for his finding that Mrs Gore profited personally from the BVI scheme (see [150] above). In addition to her unexplained receipt of $69,200 in a foreign bank account, his Honour found that in the financial year ended 30 June 2012, the MAC Trust, which Mrs Gore controlled, received $465,863 from MOGS (or the unit trust of which it was trustee). She also received from MOGS in that financial year loans of $241,044 personally, and $188,292 through the MAC Trust, in addition to her salary of $320,418.
While it is likely that a substantial amount of Mrs Gore’s salary was paid before proceeds began to flow to MOGS from the funds raised by each PPM, her receipt of at least part of those payments depended on MOGS having sufficient cash flow and available funds so that it could continue to operate. The purpose of the BVI scheme was to ensure that continuity of funds. Mrs Gore executed the loan agreements and guarantees in favour of WPO on 10 May 2012 to secure the continuing flow of money to MOGS from SPG and WPO, and to acknowledge MOGS’ indebtedness. She did so after enquiring whether the “lender” had met all its obligations (see [124] above).
His Honour considered that Mrs Gore’s involvement in the proceedings had produced a salutary effect on her, although to a limited extent, and that she had acted under the influence of her husband. The primary judge treated these matters as mitigating circumstances. I accept his Honour’s view, but note the limits which he placed upon it. In my view, Mrs Gore has shown little or no insight or contrition. She has given no explanation for her dishonest, contravening conduct, has made no offer to recompense those who lost their savings and has not acknowledged her wrongdoing. His Honour found, and I agree, that if left unrestrained, there is a real chance that Mrs Gore may engage in similar forms of activity in the future. His Honour considered that a further restraint for 7½ years was appropriate to achieve that purpose, taking into account the fact that she had already been restrained for 2½ years.
The parties have said much about the need for consistency in the imposition of restraints upon the future conduct of the various respondents. The primary judge considered that Mrs Gore’s position was substantively different from those of ActiveSuper, Mr Burrows and Mr Adamson. Each consented to a period of restraint of 10 years. Her position was also different from those of Royale and Mr Gibson. Each consented to a restraint period of 7½ years. ActiveSuper, Royale, Mr Burrows and Mr Gibson did not contest the proceedings. His Honour noted that the cases against Royale and Mr Gibson were separated from the balance of the proceedings because of Mr Gibson’s ill health. At the time at which his Honour published his primary judgment, those proceedings had not been heard. However, after his Honour published the primary reasons each consented to a 7½ year period of restraint. On the second day of the trial, Mr Adamson consented to orders against him.
The active defendants in the trial were Mr Stonehouse, who was found not to be liable, Mr and Mrs Gore and, to a limited extent, Mr Adamson. Thus, the individual defendants who were found liable were Mr and Mrs Gore, Mr George (who did not appear at the trial) and, by their consent, Mr Burrows, Mr Gibson and Mr Adamson.
Mr Gore accepted that he should be subject to a permanent restraint. His conduct was dishonest and involved his taking money for his own use and benefit. His Honour found that although Mr Burrows was involved in more contraventions than was Mr Gore, he was not as culpable. Mr Gore had been the originator and prime mover of the BVI scheme, had much greater corporate experience than Mr Burrows, had not made a public admission of the wrongfulness of his conduct and consented to the relief against him, and had, together with those associated with him, profited personally to a greater extent than Mr Burrows. Further, Mr Burrows had agreed the period of restraint and co‑operated with ASIC.
Opinions may vary as to the extent of Mrs Gore’s involvement and the relative seriousness of her misconduct. Her actual, physical involvement seems to have been limited and there is no reason to doubt her explanation for the trip to BVI. As a director of MOGS, she wanted to ensure the efficacy of the proposed course of action. There is also no reason to doubt that she was otherwise active in the conduct of the affairs of that company. The way in which she performed her role as a director is a primary consideration in fixing the period of restraint, as are the aspects of her involvement in the relevant transactions. The period of restraint may act as a deterrent to other potential offenders, but I must keep in mind that such orders are primarily protective. See Director, Fair Work Building Industry Inspectorate 326 ALR at 482 [24] and 490 [55]. In fixing the period of restraint, the Court must seek to identify a period which is likely to minimise the risk of further injury to the investing public, having regard to the seriousness of the misconduct and other relevant considerations. That period should be substantial, given the demonstrated capacity of Mrs Gore’s conduct to cause harm. It must also be sufficient to demonstrate denunciation of her conduct and to offer deterrence to others.
The evidence does not demonstrate that Mrs Gore was implicated in the initial conception and design of the schemes. Rather, she assisted in their implementation and facilitated the derivation and distribution of the substantial benefits derived from them. In those circumstances, it cannot be inferred that Mrs Gore will necessarily engage in such conduct in the future. It is necessary to balance the need to protect the public against her capacity to earn an income. That capacity may well be constrained by any injunctive relief. She has no long history of misconduct or dishonesty.
The primary judge fixed a period which he considered to be appropriate for the protective purpose of an order under s 1324(1), based upon his detailed knowledge of the facts of the case. The above discussion of the various factual considerations identified by the parties has not revealed that his Honour erred in the exercise of his discretion under s 1324(1) to fix the period during which Mrs Gore should have been restrained or the conditions of that restraint. Of course, it is necessary for a party to demonstrate that the primary judge made an error before an appellate court can interfere in such a discretionary judgment: House v The King (1936) 55 CLR 499 at 504-505 per Dixon, Evatt and McTiernan JJ. I am not persuaded that his Honour did make errors of the opposing kinds that Mrs Gore and ASIC alleged.
Moreover, having considered the facts and arguments of the parties independently (having regard to the necessity to decide whether his Honour fixed a period of restraint and conditions that was or were excessive or inadequate), I am satisfied that the primary judge arrived at a result that was appropriate in all of the circumstances and his order should not be disturbed.
The costs issue – Mrs Gore’s submissions
Mrs Gore argued that it was manifestly unreasonable for the primary judge to order her to pay 80% of 95% of ASIC’s costs. She contended that there were 18 defendants, and that she had only been found liable in respect of two categories of contraventions. Further, there was other conduct in issue, involving other defendants in relation to the US Realty matter. She argued that, at the trial, ASIC had failed to establish that she was knowingly concerned in contraventions of s 911A. Mrs Gore submitted that, first, his Honour estimated that the trial had taken an extra 12 days because she, Mr Gore and Mr Stonehouse contested ASIC’s allegations, and that his Honour then apportioned those costs to arrive at his costs order. She argued that ASIC still had to prove its case against Mr Gore and Mr Stonehouse (against whom it failed) as well as the many defendants who did not appear, and that it was not appropriate to treat her and Mr Gore as being in substantially the same positions. She contended that the liability for costs should have been divided severally between all liable defendants.
The costs issue – consideration
While costs will usually follow the event, the outcomes on distinct issues in the litigation may make it appropriate to depart from that general rule: Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at 193 [6] per French CJ, Kiefel, Nettle and Gordon JJ. However, where there are competing considerations, the order for costs will be decided so as to “reflect a broad evaluative judgment of what justice requires”: Gray v Richards (No 2) (2014) 315 ALR 1 at [2] per French CJ, Hayne, Bell, Gageler and Keane JJ.
ASIC’s case at trial against Mr Gore appeared superficially to be broader than that against Mrs Gore, and ASIC failed in its claim against her under s 911A. However, the Full Court is not in the position of the primary judge. That makes it difficult to assess with any degree of confidence how any such apparent differences could reveal that his Honour’s discretionary apportionment was erroneous. Although I have some concern that his Honour may not have sufficiently distinguished the liability for costs of Mrs Gore from that of her husband, I am not persuaded that he erred. I would dismiss this ground of appeal.
The costs of the appeal and cross appeal
The appeal and cross appeal each failed. Costs should follow the event in each.
I certify that the preceding two hundred and fifty-six (256) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 13 February 2017
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